Environmental Economics Lecture 3 Flashcards
What is economics?
Social science concerned with the production, distribution and consumption of goods and services
What are the goals of economics?
Study how choices are made to allocate resources to satisfy wants and needs
How is economics utilitarian?
Goods and services have value that can be converted to currency
What is the rational actor model?
Assumes all individuals spend limited resources to maximize individual utilities
What is an ideal economy?
Resources are allocated efficiently
What is market failure?
Situation where the supply and demand of goods and services are unbalanced
What are sources?
Part of the environment from which materials move
What are sinks?
part of the environment that receives input of materials
What do economies depend on?
Natural capital for sources of raw materials and sinks for waste products
What are the primary causes of market failures that lead to environmental problems?
Externalities and inefficiencies
What are externalities?
When producer does not pay for full cost of production
What are inefficiencies?
Scarce resources are not used well
What are human activities doing?
- Transforming land surfaces
- Altering biogeochemical cycles
- Changing hydrology
- Modifying ecosystems and species
- Altering climate and biological diversity
What are the major sectors of human society driving change?
Manufacturing and mining, agriculture, energy and transportation, forestry, recreation
What happens it we identify the optimum amount of pollution?
Lost to society of having less pollution is offset by benefits to society of the activity creating pollution
To find optimum, what must we identify and balance?
Marginal Cost of pollution and Marginal Cost of abatement
What is marginal Cost of pollution?
Cost of small additional amount of pollution
What is Marginal Cost of abatement?
Cost of reducing small amount of pollution
What if the cost is high and benefit is low?
Reduce or eliminate cost
What if the cost is low and benefit is high?
Approve action
What if the cost and benefit are equal?
Depends on societal values, economy, etc
When do Cost and benefits occur?
Either immediate benefits and delayed costs or immediate costs and delays benefits
What happens in an unregulated market?
Those who pollute only pay a small traction of the total costs of pollution
What happens with pollution in an unregulated market?
The cost of pollution faced by the polluter is substantially lower than the cost of pollution to society
What does implementing policies do for pollution?
Move polluter costs to left and reduce excess pollution
What are some strategies for pollution control?
- Command and control solutions
- Incentive-based regulations
What are command and control solutions?
Government requires particular equipment installed to lower emissions or pollutants
What is the problem with command and control solutions?
Discourages low-cost alternative or creativity
What are some incentive-based regulations?
- Environmental (“green”) taxes
- Tradeable permits
What are environmental (“green”) taxes?
Taxes on pollution
What are tradeable permits?
Rely on identifying optimum level of pollution and permit holder can generate pollution or sell permit
What does adding a “green” tax do?
Encourages polluter to decrease pollution
What is a point source pollution?
Stationary location where pollutants are emitted (identifiable discharge point of pollution)
What are non-point source pollutions?
Sources that are diffuse and do not have a point of origin
What is the US NPA’S NPDES?
A permit program that controls water pollution by regulating point sources and limiting discharge pollutants
What does NPDES stand for?
National Pollutant Discharge Elimination System
What is a NPDES permit?
License to discharge specified amount of pollutants into water under certain conditions
Who is required to have a NPDES permit?
All facilities that discharge directly into surface waters
Who is exempted from having a NPDES permit?
8 total - Non point source agricultural activities
What are the criticisms of environmental economics?
Difficult to access true costs of environmental pollution and abatement & utilitarian economics may not be appropriate
Why is it difficult to assess true costs of environmental pollution and abatement?
- impacts of pollution on people and nature is uncertain
- unknown value of ecosystem services (indirect benefits)
- impacts of actions on global-scale problems like climate change are hard to predict
Why utilitarian economics may not be appropriate?
- dynamic changes and time are not considered
- often marginal cost functions are arrived at without empirical evidence or data
What are national income accounts?
represents the total income of a nation for a given year (GDP and NDP)
What does NDP account for?
capital depreciation over the year\
What is GDP and NDP?
- provides estimates of national economic performance
- important for policy decisions
- misleading and incomplete because these metrics do not incorporate environmental factors
Why may the environment be exploited?
to yield a higher GDP in developing/emerging economies
What is Yale’s Environmental Performance index (EPI)?
assesses a country’s commitment to environmental and resource management
